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Business Deduction for Leased Cars Eased

1 October 1998

Business Deduction for Leased Cars Eased; NAEA Says IRS Ruling May Result in Significant Taxpayer Savings

    GAITHERSBURG, Md., Oct. 1 -- A little-noticed IRS ruling
(Revenue Procedure 97-58) clarifies that taxpayers with leased cars may deduct
their business mileage in the same manner as if the car were a purchased
vehicle, advises the National Association of Enrolled Agents (NAEA).
    According to NAEA -- whose 10,000 members are the only tax professionals
licensed by the federal government to represent taxpayers before the Internal
Revenue Service -- expenses for leased vehicles previously were deductible
using only the "actual cost" method ... while purchased vehicles could use
either the "actual cost" or "mileage rate" method.
    As a result of this change, expenses for leased vehicles can be deducted
using either method.
    The Internal Revenue Service currently permits a deduction for business
use of a vehicle at the rate of 32-1/2 cents per mile.
    "I was amazed when I looked into this for one of my clients who drives
hundreds of miles each week, since he's in sales," said Enrolled Agent Frank
Degen of Setauket, New York.  "This will save him literally hundreds of
dollars in 1998 alone!"
    Business use does not cover a vehicle's operation to run personal errands
... or for commuting purposes (generally the mileage from one's home to
his/her first place of business each day, and back home from the last business
stop at the end of the day).  However, adds NAEA, all business-related mileage
for self-employed persons or employees not reimbursed by their employers
between a day's first and last stop now may be counted for the "mileage rate"
deduction.
    Enrolled Agents are an excellent resource for taxpayers and anyone seeking
up-to-the-minute information on tax-related issues.  For more information
about business mileage deductions for leased cars, contact NAEA headquarters:
200 Orchard Ridge Drive o Suite 302, Gaithersburg, MD 20878.  Telephone: 301-
212-9608.  Fax: 301-990-1611.  E-mail: <naea@naea.org>.  Internet:
<http://www.naea.org>.  To locate an EA in your area, call NAEA's 24-hour
Referral Service Hotline at 1-800-424-4339.  All inquiries are confidential.